5.25.2022 Washington Update

“This is the way the world ends.  Not with a bang, but a whimper.”  T.S. Eliot

Outlook – How will Congress proceed into the August recess, just as campaign season rushes in?  With a bang, or a whimper?  The list of potential bills ranges from the mighty to the mundane.  But time is running out.  Here’s our take on the next two months:

Build Back Better: It’s Washington’s waning, deflating obsession, and Sen. Joe Manchin (D-WVA) is at it again.  In Davos (of all places), Manchin signaled (once again) his openness to a deal to revive President Biden’s signature legislative initiative.  The elements, according to Manchin (once again), are prescription drugs, addressing inflation and deficit reduction, and energy and climate change.

Don’t hold your breath.  Aside from Manchin’s meandering, time, among much else, is always critical in reconciliation discussions.  A factor of some importance: with just three months until the Sept. 30 deadline, will there be sufficient time to demonstrate a meaningful budgetary impact in FY 2022?  If not, Democrats risk losing their reconciliation protections.

Another factor: Republicans would love nothing more than a vote-a-rama in late July or August, subjecting vulnerable Democrats in cycle to a seemingly endless series of painful votes on, among other issues, energy prices, immigration, baby formula, crime, education, fentanyl, covid mandates, and inflation.  (Note: it’s certainly possible Republicans could break budget points-of-order on these issues).  Finally, Manchin continues to mention “fossil” in the same breath as “energy and climate” when talking reconciliation.  But adding policy on pipelines, more domestic drilling, and regulatory rollbacks must be shoehorned into budgetary shape, which is complicated, to say the least.

Manchin-Murkowski: To overcome possible Byrd-rule objections, Manchin has teamed up with Sen. Lisa Murkowski (R-AK) to find a potential 60-vote pathway on energy and climate policy.  The duo has convened a bipartisan group of senators, who have had several meetings, but with little focus and direction.  We expect these talks to continue but remain skeptical that any concrete legislative package emerges soon, or even this year.  Everything we hear from staff involved is that these talks could lay a foundation for some sort of energy and climate deal next year.

China competitiveness legislation: Much of the June work period will revolve around conference negotiations aimed at resolving House-Senate differences on China competitiveness legislation.  For starters, any conference with over 100 members, involving nearly every committee on the Hill, will take time.  To date, little of consequence has occurred.  We expect serious activity to commence just after Memorial Day recess.

While the press has been circulating documents that propose various deadlines for conferees to meet, the reality is that each chair and ranking member will work at their own pace.  All parties involved recognize that a deal before August recess is the goal, but this next work period will determine if that timeline is feasible.  Our sense, at least at this stage, is that it’s not.  If anything, politics could affect timing.  Do Republicans really want to hand Joe Biden a “win” on China before November?

This conference will have to tackle some weighty issues.  High on the list is whether the eventual conference report will include a tax title—many on both sides want one, but Rep. Kevin Brady (R-TX), ranking member of the Ways and Means Committee, who commands great respect among House Republicans, is opposed.  Also, we expect to hear a lot more about the need to extend Trade Adjustment Assistance in the coming weeks as it expires on July 1.

So, what does all this portend?  A lame duck deal?  If Republicans have a big election night in November, they may not be in a mood to compromise.  At least that’s likely to be the case for House Republicans.  As for the Senate, that’s a different story.  In any event, one should not assume that December necessarily creates a “clear-the-decks” mentality to pass unfinished business, including this bill. The idea that retiring centrists will dictate a final deal after a landslide election seems far-fetched.  Leader McCarthy’s potential election for the speakership could also play a factor.

Appropriations: House Appropriations subcommittees could move to mark up spending legislation in June. We don’t expect much, if any, regular order spending activity in the Senate.

The prospects for a Covid supplemental bill are dim, as Republicans continue to insist on tying the issue to Title 42 and immigration.  Moreover, our understanding is that some pay-fors that were previously under discussion are now off the table, making it much harder to reach a deal.

Democrats also may cobble together a border supplemental bill to address the influx of summer migrants—an issue that polls consistently show is among the top concerns of voters.  The administration is also considering making its appropriations request next month, which could act as a catalyst for legislation.  This all comes in the wake of differences among Democrats, particularly from those facing voters in November, over the administration’s handling of Title 42.

Notwithstanding COVID and immigration, we expect a continuing resolution to pass in September, punting the budget into the lame duck.  As noted earlier, with the election results behind them, it’s not clear if Republicans will submit to a deal or wait until 2023 to seek a better deal.

NDAA: Work on the FY23 National Defense Authorization Act will commence on June 8 when the House Armed Services Committee begins its subcommittee markups.  A full committee markup will be on June 22.  The Senate Armed Services Committee will not be far behind.  The question, then, is whether the House and Senate can pass their respective bills before August—for now, the outlook for both bills is unclear.

Nominations: As always, nominations will be a priority for the White House and Senate Democrats, especially judges.  Nominees for the Securities and Exchange Commission and Michael Barr to be Vice-Chair for Supervision at the Federal Reserve will get top billing in the coming weeks. FCC nominee Gigi Sohn continues to struggle to gain the support needed to advance her nomination.

We’ll also be watching the nomination of Federal Energy Regulatory Commission Chairman Rich Glick.  Questions abound whether he has the full support of Sen. Manchin, chairman of the Senate Energy and Natural Resources Committee.  It’s too early to tell, but we think there’s a decent chance Republicans mount unanimous opposition to Glick, who, in their minds, has become the chief architect of Biden’s energy policy.

It’s certainly possible that Glick, along with many of the 200-plus nominees awaiting either committee or floor action, could get corralled into an end-of-year nominations package, as has become fairly typical in the Senate.

Anti-trust legislation: Majority Leader Chuck Schumer (D-NY) may begin debate on Sen. Amy Klobuchar (D-MN) and Sen. Chuck Grassley’s (R-IA) anti-trust legislation, the “American Innovation and Choice Online Act.”  Senators Klobuchar and Grassley have been working on modifying their initial proposal to garner more support after a divided markup in the Senate Judiciary Committee.  Getting 60 votes for cloture on the motion to proceed will be a tall order.  Senators would certainly fight for a robust and time-consuming amendment process given the magnitude of the legislation.

Supreme Court: Overshadowing the entire June work period is the Supreme Court, which many expect, based on the recent leak of a draft decision, will overturn Roe v. Wade.  The decision will likely be released later in June.  If Roe is overturned, as many in the media are reporting it could be, Democrats could have additional votes on related legislation, which would crowd out a good deal of the limited Senate floor schedule.